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ST 2007-04 - Sales and Use Tax: Sales of Motor Vehicles to
Nonresidents of Ohio – Issued August 2007

The purpose of this information release is to communicate a
change in the Revised Code and the Department’s policy on
sales of motor vehicles to nonresidents of Ohio.

Amended Substitute House Bill 119, the State Budget Bill,
changed the application of Ohio sales tax on the purchase of
motor vehicles by nonresidents. This change applies only to
sales of
motor vehicles to nonresidents on and after August 1, 2007.
Leases to nonresidents continue to not be subject to the tax.

The new statute, RC 5739.029, is provided at the end of this
release.

To What Transactions does this Provision
Apply?

Under this new provision, Ohio motor vehicle dealers must
collect tax from nonresidents of Ohio
where the state in which the motor vehicle will be titled or
registered imposes its sales, use, or similar tax to Ohio
residents and allows a credit against such tax for Ohio sales
or use tax paid. Most residents of other states will continue
to be exempt from Ohio sales and use tax on the purchase of
motor vehicles. Specifically, Ohio tax will not apply to
transactions where the vehicle will be titled or registered
in another state that:

1. Provides a nonresident motor vehicle exemption from their
sales and use tax law under which Ohio residents can purchase
a vehicle and not be required to pay sales or use tax,

2. Does not give credit against their sales, use or similar
tax for Ohio sales and use tax paid, or

3. Does not have a sales, use or similar tax that applies to
sales of motor vehicles.

Currently, there are only eight states that do not fall in at
least one of the above categories. Those states are
Arizona, California, Florida, Indiana, Massachusetts,
Michigan, South Carolina and Washington. So this change to
Ohio tax law will only affect sales of motor vehicles by Ohio
dealers to nonresidents of Ohio that will remove the vehicle
for titling, registration or use in one of those states.

The exclusions from the tax that are listed above only apply
to nonresidents of Ohio that remove the vehicles from Ohio to
be titled, registered or used in another state, which is
defined to include districts, territories, commonwealths and
other possessions of the United States, such as the District
of Columbia, U. S. Virgin Islands and Puerto Rico. However,
the tax provisions of R.C. 5739.029 apply to all sales of
motor vehicles by an Ohio motor vehicle dealer to a
nonresident of Ohio that removes the vehicle from Ohio to be
titled, registered or used outside Ohio, whether in another
state or in a foreign nation.

How Is the Tax Calculated?

The amount of tax to charge and collect on sales of motor
vehicles to nonresidents of Ohio that will remove the vehicle
purchased to any of the eight states mentioned above to be
titled, registered or used is the lesser of the amount of tax
due in Ohio, versus the amount of tax the nonresident would
pay in the state of titling, registration or use, after
taking certain factors into account. Trade-in allowance for
reducing price before computing the sales tax is permitted on
the sale of new or used vehicles to nonresident purchasers
from the specified states if allowed by the state to which
the vehicle will be removed. Rebates or other cash back
offers paid by someone other than a dealer do not reduce the
tax base, except in South Carolina.

To determine the lowest tax, make the following computations:

The Ohio price of the vehicle should be computed using
Ohio laws as you would for any sale to an Ohio resident,
taking into account the trade-in deduction if the sale is of
a new
vehicle. The tax rate to apply to the Ohio price is 6.0%

Calculate the other state price (taking into account the
above adjustments, such as a trade-in allowance as permitted
by the other state) and apply the tax rate of the other state
as listed in the chart below. (Please note that the chart
below is subject to change. Accordingly, you are
advised to make sure you stay current with any updates to
this release. For automatic notifications by e-mail, please
sign up for OHTAX-Alert at:
http://tax.ohio.gov/ohiotaxalert/isUserInfo.asp.)

Collect the tax from the customer using the lesser of the
two amounts.

The following is the list of the states, applicable tax rate,
and the adjustments that can be made to determine the correct
amount of tax to
collect:

State

Tax Rate

Trade-In Allowance

Tax Cap

Arizona

5.60%

Yes –New and Used

California

7.25%

No

Florida

6.00%

Yes- New and Used

Indiana

7.00%

Yes-New and Used

Massachusetts

5.00%

Yes-New and Used

Michigan

6.00%

No

South Carolina

5.00%

Yes-New and Used

$300.00

Washington

6.50%

Yes-New and Used

For sales to nonresidents of Ohio that remove the vehicle to
South Carolina for titling, registration or use, tax should
only be collected up to the maximum due in that state, $300.

Sales to nonresidents of Ohio that are to be removed to any
other state
not listed above for titling, registration or use are not
subject to Ohio tax, provided the proper affidavit for
nonresident sales is completed by the purchaser and tendered
to the Clerk of Courts when application for title is made.

For sales to nonresidents of Ohio that will remove the
vehicle purchased to any foreign country for titling,
registration or use, the Ohio tax should be collected at six
percent (6%) of the price of the vehicle. (This is because
there is not a tax from another ­state to compare to the
Ohio tax and take the lesser of.)

As with any purchase of a motor vehicle by a nonresident, the
customer must complete the affidavit regarding a sale to an
out-of-state resident. This form, STEC-NR, can be found in
the Tax Forms section on the Department of Taxation’s Web
site at tax.ohio.gov. On the top of the affidavit,
the date of sale must be entered. The date of sale is when
the customer pays for the vehicle, or takes delivery,
whichever comes first, which should occur prior to the title
being issued. The amount of tax collected on the sale must be
stated on the affidavit, as well as on the application for
title. If a sale of a used vehicle with a trade-in, the
amount of the trade-in should be written on the nonresident
affidavit. These documents should be tendered to the Clerk of
Courts as is customary practice.

A sale to a nonresident of Ohio that will remove the vehicle
purchased to one of the eight states where tax is to be
collected could still qualify for exemption from the tax if a
valid Ohio exemption exists. For example, a trucking company
from Michigan could claim an exemption for personal property
used in highway transportation for hire if they are carrying
goods belonging to others and are the holder of a permit or
certificate issued by the United States authorizing the
holder to engage in transportation of the personal property
belonging to others for consideration over or on highways. In
this case, the purchaser would issue the Sales and Use Tax
Certificate of Exemption Regarding Sale of a Motor Vehicle,
Off-Highway Motorcycle, or All-Purpose Vehicle , in lieu
of the nonresident affidavit. This form, STEC MV, can be
found in the Tax Forms section of the Ohio Department of
Taxation’s website at
tax.ohio.gov. Exemptions
allowed in other states but not in Ohio do not qualify for
exemption from the Ohio tax.

Examples

Example 1: An Indiana resident purchases a
new vehicle from an Ohio dealer. There is no trade-in
involved in the transaction.

Ohio Calculation

Indiana Calculation

Purchase Price

$23,000.00

$23,000.00

Tax Rate

6.00%

7.00%

Calculated Tax

$1,380.00

$1,610.00

Tax to be Remitted in Ohio

$1,380.00

Example 2: A Florida resident purchases a
new vehicle from an Ohio dealer. The customer has a trade-in.

Ohio Calculation

Florida Calculation

Purchase Price

$25,000.00

$25,000.00

Trade-In Allowance

$7,500.00

$7,500.00

Tax Base

$17,500.00

$17,500.00

Tax Rate

6.00%

6.00%

Calculated Tax

$1,050.00

$1,050.00

Tax to be Remitted in Ohio

$1,050.00

Example 3: A Michigan resident purchases a
new vehicle from an Ohio dealer. The customer has a trade-in.
Michigan does not allow a trade-in allowance.

Ohio Calculation

Michigan Calculation

Purchase Price

$28,000.00

$28,000.00

Trade-In Allowance

$7,500.00

$7,500.00

Tax Base

$20,500.00

$28,000.00

Tax Rate

6.00%

6.00%

Calculated Tax

$1,230.00

$1,680.00

Tax to be Remitted in Ohio

$1,230.00

Example 4: A California resident purchases a
new vehicle from an Ohio dealer. There is no trade-in
involved in the transaction.

Ohio Calculation

California Calculation

Purchase Price

$33,000.00

$33,000.00

Tax Rate

6.00%

7.25%

Calculated Tax

$1,980.00

$2,392.50

Tax to be Remitted in Ohio

$1,980.00

Note on Examples 3 and 4. In these examples,
the dealer will report and pay to Ohio a tax amount that will
be less than due in the resident state. Upon return to the
home state, the purchaser will owe additional tax. The Ohio
dealer at the request of the customer may collect the entire
amount of tax due for the transaction. When completing the
application for title and the nonresident affidavit, the
dealer should list only the tax collected and paid to Ohio.
The bill of sale should list the tax amounts for the two
states respectively. The customer will receive credit only
for the amount of tax paid to Ohio.

Example 5: An Indiana resident purchases a
used vehicle from an Ohio dealer. The customer has a
trade-in.

Ohio Calculation

Indiana Calculation

Purchase Price

$17,000.00

$17,000.00

Trade-In-Allowance

$3,500.00

$3,500.00

Tax Base

$17,000.00

$13,500.00

Tax Rate

6.00%

7.00%

Calculated Tax

$1,020.00

$945.00

Tax to be Remitted in Ohio

$945.00

Example 6: A South Carolina resident
purchases a new vehicle from an Ohio dealer. The customer has
a trade-in. South Carolina has a $300.00 cap on the amount of
tax to collect on the sale of a vehicle.

Ohio Calculation

South Carolina

Purchase Price

$24,000.00

$24,000.00

Trade-In-Allowance

$4,500.00

$4,500.00

Tax Base

$19,500.00

$19,500.00

Tax Rate

6.00%

5.00%

Calculated Tax

$1,170.00

$975.00

Tax to be Remitted in Ohio

$300.00

How Is the Tax Reported and Remitted to the State?

For Sales prior to July 1,
2008:

For sales made on or after August 1, 2007 through June 30,
2008, dealers will remit tax collected on sales to
nonresidents directly to the State of Ohio using the Ohio
Business Gateway (OBG), instead of paying the tax to the Ohio
Clerks of Courts.

To use the OBG, a dealer can go to
obg.ohio.gov and register its
business if it has not done so already. The OBG can also be
used to file regular sales tax returns, as well as employer
withholding and commercial activities tax returns and
payments. In the registration process, the dealer will be
asked for the FEIN or SSN, vendor’s license number, dealer
permit number, address, contact person, email address and
phone number. Dealers that file sales tax returns on a master
number (89-X3XXXX) will use the master number as the vendor’s
license number and report the tax by each dealer permit
number.

Once registered with the OBG, the dealer can select the
application to pay the sales tax on sales to the specific
nonresidents. The tax is to be paid monthly, by the 10th of
the month following the close of each month (it cannot be
filed with the regular sales tax return on the 23rd). So the
tax due for nonresident sales for the month of August 2007
must be paid by September 10th. The dealer should only pay
the tax once for all nonresident motor vehicle sales made
during any month, not when each sale occurs. Dealers that
file their sales tax return, form UST-1, on a semiannual
basis, must
still report and pay the nonresident tax monthly. If the tax
is timely filed and paid, the vendor discount (0.75%) will be
applied.

The dealer will not have to list each transaction separately.
However, the dealer will have to list, by state, the number
of transactions, the total purchase price of all sales, and
the total tax collected. The OBG system allows for payment by
ACH Debit only.

If the tax is not paid timely, a late payment fee of $100.00
will be added.

When filing the sales tax return, form UST-1, sales to all
nonresidents should be included. Those sales where tax
is collected will be reported on lines 1, 3, and 4, as are
all other taxable motor vehicle sales. Sales to residents of
states where the tax is not collected are reported on lines 1
and 2 only.

For Sales made on or after July 1, 2008:

For sales of motor vehicles to nonresidents made on or after
July 1, 2008, the dealer will remit the tax to the Clerk of
Courts at the time the nonresident title is applied
for. At the present time, the Automated Title
Processing System (ATPS) is being modified to accommodate
this process. Further information will be forthcoming.

What Impact Does This Have on Motor Vehicle Sales to
Ohio Residents?

The new provisions (i.e., R.C. 5739.029) do not apply to any motor
vehicle sale to an Ohio resident.

If an Ohio resident purchases a motor vehicle from an Ohio
motor vehicle dealer and takes possession of the vehicle in
Ohio, the dealer must obtain title for the vehicle in the
manner it always has. The Ohio tax will be paid based
upon the purchaser’s county of residence. The purchaser’s subsequent
removal of the vehicle from Ohio does not affect the Ohio tax
liability.

If an Ohio resident purchases a motor vehicle from an Ohio
dealer and instructs the dealer to deliver the vehicle to a
location outside Ohio where the vehicle will be subsequently
titled, registered or used, the dealer should complete a
notarized Statement Regarding Sale of a Motor Vehicle,
Off-Highway Motorcycle, or All-Purpose Vehicle in Interstate
Commerce, and present it to the dealer. The dealer may then
obtain an Ohio title without collection or payment of the
Ohio tax, as the sale will be a sale in interstate commerce.
The required statement can be completed on form STEC IC,
which is available on the Ohio Department of Taxation
website, tax.ohio.gov, under the “Tax Forms” tab.

Questions?

If you have any questions regarding this matter, you should
direct your questions to one of our taxpayer service centers
or call 1-888-405-4039.

(A) Notwithstanding sections 5739.02, 5739.021, 5739.023,
5739.026, 5741.02, 5741.021, 5741.022, and 5741.023 of the
Revised Code, and except as otherwise provided in division
(B) of this section, the tax due under this chapter on the
sale of a motor vehicle required to be titled under Chapter
4505. of the Revised Code by a motor vehicle dealer to a
consumer that is a nonresident of this state shall be the
lesser of the amount of tax that would be due under this
chapter and Chapter 5741. of the Revised Code if the total
combined rate were six per cent, or the amount of tax that
would be due, to the state in which the consumer titles or
registers the motor vehicle or to which the consumer removes
the vehicle for use.

(B) No tax is due under this section, any other section of
this chapter, or Chapter 5741. of the Revised Code under any
of the following circumstances:

(1)(a) The consumer intends to immediately remove the motor
vehicle from this state for use outside this state;

(b) Upon removal of the motor vehicle from this state, the
consumer intends to title or register the vehicle in another
state if such titling or registration is required;

(c) The consumer executes an affidavit as required under
division (C) of this section affirming the consumer's
intentions under divisions (B)(1)(a) and (b) of this section;
and

(d) The state in which the consumer titles or registers the
motor vehicle or to which the consumer removes the vehicle
for use provides an exemption under circumstances
substantially similar to those described in division (B)(1)
of this section.

(2) The state in which the consumer titles or registers the
motor vehicle or to which the consumer removes the vehicle
for use does not provide a credit against its sales or use
tax or similar excise tax for sales or use tax paid to this
state.

(3) The state in which the consumer titles or registers the
motor vehicle or to which the consumer removes the vehicle
for use does not impose a sales or use tax or similar excise
tax on the ownership or use of motor vehicles.

(C) Any nonresident consumer that purchases a motor vehicle
from a motor vehicle dealer in this state under the
circumstances described in divisions (B)(1)(a) and (b) of
this section shall execute an affidavit affirming the
intentions described in those divisions. The affidavit shall
be executed in triplicate and in the form specified by the
tax commissioner. The affidavit shall be given to the motor
vehicle dealer.

A motor vehicle dealer that accepts in good faith an
affidavit presented under this division by a nonresident
consumer may rely upon the representations made in the
affidavit.

(D) A motor vehicle dealer making a sale subject to the tax
under division (A) of this section shall collect the tax due
unless the sale is subject to the exception under division
(B) of this section or unless the sale is not otherwise
subject to taxes levied under sections 5739.02, 5739.021,
5739.023, 5739.026, 5741.02, 5741.021, 5741.022, and 5741.023
of the Revised Code. In the case of a sale under the
circumstances described in division (B)(1) of this section,
the dealer shall retain one copy of the affidavit and file
the original and the other copy with the clerk of the court
of common pleas. If tax is due under division (A) of this
section, the dealer shall remit the tax collected to the
clerk at the time the dealer obtains the Ohio certificate of
title in the name of the consumer as required under section
4505.06 of the Revised Code. The clerk shall forward the
original affidavit to the tax commissioner in the manner
prescribed by the commissioner.

Unless a sale is excepted from taxation under division (B) of
this section, upon receipt of an application for certificate
of title a clerk of the court of common pleas shall collect
the sales tax due under division (A) of this section. The
clerk shall remit the tax collected to the tax commissioner
in the manner prescribed by the commissioner.

(E) If a motor vehicle is purchased by a corporation
described in division (B)(6) of section 5739.01 of the
Revised Code, the state of residence of the consumer for the
purposes of this section is the state of residence of the
corporation's principal shareholder.

(F) Any provision of this chapter or of Chapter 5741. of the
Revised Code that is not inconsistent with this section
applies to sales described in division (A) of this section.

(G) As used in this section:

(1) For the purposes of this section only, the sale or
purchase of a motor vehicle does not include a lease or
rental of a motor vehicle subject to division (A)(2) or (3)
of section 5739.02 or division (A)(2) or (3) of section
5741.02 of the Revised Code;

(2) "State," except in reference to "this state," means any
state, district, commonwealth, or territory of the United
States.